December 9, 2010
Raymond Baker
This article was originally published by The Huffington Post.
This year’s International Anti-Corruption Day is marred by a U.S. Chamber of Commerce attempt to weaken the Foreign Corrupt Practices Act (FCPA), our nation’s flagship anti-corruption legislation. Passed in 1977, the FCPA was a response to eroded public trust in government following the Watergate scandal and the admission by Lockheed and some 400 other American companies that bribery to foreign officials was a commonplace practice in international commerce.
The U.S. FCPA stood virtually alone on the global stage in the fight against corruption until the late 1990s, when other nations began adopting similar prohibitions. Today, the FCPA is buttressed by the UN Convention Against Corruption, a similar document binding members of the Organization for Economic Cooperation and Development, regional commitments, and a significant focus on the issue by the G20.
The Chamber asserts in its paper “Restoring Balance” that “the central aim of the FCPA is to prohibit the payment of bribes to foreign officials for the purpose of obtaining or retaining business.” This narrow understanding misses the larger point of the FCPA: that the central aim of U.S. anti-corruption efforts is to promote efficiently functioning global markets, where both American and foreign companies can compete on the merits of their products and services in stable business environments guided by the rule of law.
The Chamber argues for giving subsidiaries of multinational companies a loose rein. A parent company’s “control of the corporate actions of a foreign subsidiary should not expose the company to liability… where it neither directed, authorized, nor even knew about improper payments.” In a world where so much of global business is done by companies via hundreds, even thousands, of subsidiaries, gutting the FCPA in this way would subject the United States to ridicule.
The Chamber also wants to limit “successor liability” in cases of mergers and acquisitions. It argues that “a corporation, irrespective of whether or not it conducts reasonable due diligence… should not be held criminally liable for historical violations” of FCPA prohibitions. Aggressive due diligence might be a reasonable defense, but a free pass for acquired problems “irrespective” of due diligence is far too lax a standard.
The Chamber goes on to complain that “a company can face criminal penalties for a violation of the FCPA even if it (and its employees) did not know that its conduct was unlawful.” In other words: ignorance of the law is no excuse for people like you and me, but it should be for corporations bribing foreign officials.
And who should be classified as a foreign government official? A mid-level manager in a state-owned enterprise? A government official named a board member of a private company? The Department of Justice has brought many FCPA actions in recent years with an expansive view of this question. Clarification may be needed, but the short answer to this dilemma is don’t bribe anyone, whether she/he is a public official, a private citizen, or someone in between.
In 1947, my father was elected a director of the U.S. Chamber representing six southern states. Traveling to Washington every two or three months, he rose to head the national finance committee. Two decades later I asked him to serve as a director of the company I built — Nigerian Diversified Investments, Ltd. At board meetings in Lagos we frequently faced — and always faced down — bribery demands, as he argued for upholding high standards of integrity.
The Chamber says that it wants to “remove obstacles that currently hamper the competitiveness of American businesses.” To the contrary, my experience in more than 50 developing countries confirms that the FCPA enhances the stature of Americans doing business abroad rather than limits our opportunities. I’ve frequently heard the comment “they can’t pay; they’re Americans” on the path to successful negotiations. We may lose the occasional piece of business, but we gain a lot more.
“Balance” in fighting corruption is the wrong concept. What is happening now in the U.S. Chamber would be greatly disturbing to my father were he still alive. We have commitments to keep, to ourselves and to the rest of the world.